The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas International Securities Exchange’s (BISX) plans to launch a ‘commercial paper’ market and ‘non-traded’ securities tier are “not dead”, but instead being “tweaked” to ensure they are suitable for the local capital markets.

Keith Davies, the exchange’s chief executive, told Tribune Business that expansion plans first revealed to this newspaper in late 2012 remained very much alive, but he was working to “tailor” them to the Bahamian reality.

And he made a renewed call for a credit rating agency to either be established, or enter into, the Bahamian capital markets, suggesting that this nation was missing a key “building block”.

Mr Davies said a Bahamian version of Moody’s or Standard & Poor’s (S&P) was essential to provide independent analysis and ratings of public companies and their securities issues, as this would lead to the development of a more transparent pricing mechanism and yield curve.

BISX had proposed a commercial paper market, or ‘trade financing’. as a platform for Bahamian companies to issue short-term debt securities to buyers and overcome temporary cash flow issues.

Effectively, BISX would be facilitating an alternative to bank overdrafts, bridging loans and letters of credit (LOC) for creditworthy companies, with gasoline stations a prime example.

The exchange has also been exploring the creation of a separate listing category for ‘non-traded’ securities. This would be an “incubator-type” facility targeted at Bahamian companies that did not want to go public, but had the size and characteristics of firms that were.

In essence, this facility is designed as a ‘stepping stone’ to such companies eventually going public, while also providing a platform to market themselves to Bahamian investors.

Mr Davies told Tribune Business in a recent interview that he had discussed with Hillary Deveaux, the Securities Commission’s executive director, “ways to tailor them to the Bahamian market”.

Speaking specifically to both development initiatives, the BISX chief executive added: “We had a notion and knew what we wanted to do.

“They need tweaking. The way I envisioned them working may not get the results on the ground with a small market.”

Mr Davies said he was working to develop “avenues” that would support the markets he was seeking to create, ensuring key professionals such as attorneys, accountants and broker/dealers were on board.

And he also wanted to provide companies “with the level of support” they needed to survive and be sustainable, once they entered the market.

“How do you tailor it to allow businesses to thrive in this type of environment, and get to the stage where the market can support it, and they can support themselves in the market,” Mr Davies said of the key question facing him.

“These things are not dead. They just need to be worked. It’s a task that needs focused energy.”

The BISX chief emphasised that he would not be held to self-imposed deadlines to launch these new initiatives, adding: “Until it works, I will not move it forward.”

Mr Davies, meanwhile, added that a credit rating agency operating in the Bahamas would also tie-in to long-running efforts - spanning over a decade - to get the Government to list all its debt securities on BISX.

“We need to get a credit rating agency set up here,” he told Tribune Business. “Companies need to be benchmarked, reviewed and analysed on their operations.

“That’s how pricing takes place, and it steps up into the Government debt market, because that’s the benchmark.”

The Caribbean regional credit rating agency, CariCRIS, has looked at entering the Bahamian capital markets previously, but Mr Davies was unaware if any progress had been made - either by itself or in a joint venture with a Bahamian partner.

“We need some formalised process through which to do proper analysis and ratings,” he reiterated. “It’s another building block; it’s another key component.

“Once it’s here it allows the market to broaden even more. Markets are all about risk; assessing risk and advising people to take decisions based on that risk.

“The measurement of risk is fundamental, with credit rating agencies determining the value of securities coming out.”

Mr Davies said he understood some progress had been made in readying Bahamian government debt securities to come to market, with a report done through the Central Bank.

“It’s the beginning of moving in that direction,” he said. “A debt management committee is one of the first steps towards formalising a government debt market. You need that department to do analysis of what debt the government needs to raise, and the methods to do it.”